Tuesday, March 24, 2015

In my report on the Brewers Association's 2014 'craft' beer business numbers, the footnotes were as lengthy as the body of the post. In hindsight, I believe that those observations and definitions rise above the level of mere clarification. So, I've brought them out into the open, above the jump.

The (U.S.) Brewers Association —parenthesis, mine— was founded in January 2005 as a merger between the Association of Brewers (founded in 1983) and the Brewers Association of America (founded in 1941) ...

"to promote and protect American craft brewers, their beers and the community of brewing enthusiasts."

The Brewers Association is an organization of brewers, for brewers and by brewers. More than 2,300 U.S. brewery members and 43,000 members of the American Homebrewers Association are joined by members of the allied trade, beer wholesalers, retailers, individuals, other associate members and the Brewers Association staff to make up the Brewers Association.

Small
Annual production of 6 million barrels of beer or less (approximately 3 percent of U.S. annual sales). Beer production is attributed to the rules of alternating proprietorships.

Independent
Less than 25 percent of the craft brewery is owned or controlled (or equivalent economic interest) by an alcoholic beverage industry member that is not itself a craft brewer. *

Traditional
A brewer that has a majority of its total beverage alcohol volume in beers whose flavor derives from traditional or innovative brewing ingredients and their fermentation. Flavored malt beverages (FMBs) are not considered beers.

And, here's how the BA differentiates between six categories of breweries:

Microbrewery
A brewery that produces less than 15,000 barrels (17,600 hectoliters) of beer per year with 75 percent or more of its beer sold off-site.

Brewpub
A restaurant-brewery that sells 25 percent or more of its beer on site. The beer is brewed primarily for sale in the restaurant and bar. The beer is often dispensed directly from the brewery’s storage tanks. Where allowed by law, brewpubs often sell beer “to go” and /or distribute to off site accounts. Note: BA re-categorizes a company as a microbrewery if its off-site (distributed) beer sales exceed 75 percent.

Contract Brewing Company
A business that hires another brewery to produce its beer. It can also be a brewery that hires another brewery to produce additional beer.

Regional Brewery
A brewery with an annual beer production of between 15,000 and 6,000,000 barrels.

Regional Craft Brewery
An independent regional brewery (between 15,000 and 6,000,000 barrels) with a majority of volume in “traditional” or “innovative” beer(s).

Large Brewery
A brewery with an annual beer production over 6,000,000 barrels.

Did last year's 'craft' definition change affect the numbers?

In 2014, the BAchanged its definition of 'small' brewery, increasing the upper annual production limit by 200%, from two to six million barrels of beer, and it changed the definition of 'traditional' from this (to what is stated above):

A brewer who has either an all malt flagship (the beer which represents the greatest volume among that brewers brands) or has at least 50% of its volume in either all malt beers or in beers which use adjuncts to enhance rather than lighten flavor.

When the BAannounced an 18% growth in the volume of 'craft' beer sold in 2014 over 2013, that definition change could have accounted for a non-trivial portion of that increase. In a footnote to that press release, the BA stated: "[Volume of craft beer sold] figure derived from comparable data set based on 2014 update of craft brewer definition." Thus, it appears appears that there may have been some sort of weighting of the numbers. Learning if so, and what exactly that might have been, will have to wait until the Craft Brewers Conference, in Portland, Oregon, in April, where the BA will release its final report.

In terms of the number of breweries, however, any increase caused by that would have been negligible. The small number of formerly 'large' or 'non-traditional' breweries that have now been re-branded as 'craft' —e.g., Yuengling, August Schell and Straub— would have been overwhelmed by the large numbers ofmicrobreweries, brewpubs, and regional craft breweries. And without the size-increase in the definition, Boston Beer/Sam Adams, which had been 'craft,' would have been excised from the 'craft' beer ranks.

Calculating the total beer volume in 2014 —using the BA's number of 'craft' beer volumes of 22.2 million barrels as 11% of the total volume— yields 201.82 million barrels of beer.

The NBWA based its numbers on the TTB's report of beer produced: 2,843,141,000 case equivalents (CEs). Since one barrel of a beer (31 gallons) is approximately 13.78 CEs, total U.S. beer production in 2014 can be calculated to 206.3 million barrels. A big discrepancy, even if accounting for rounding errors.

* Under the BA's 'Independent' definition, pioneering 'craft' brewers such as Widmer and Redhook are not considered 'craft;' nor are Blue Point, Goose Island, Elysian, all of which were recently majority-purchased by Anheuser-Busch; nor is Founders, which recently sold a 30% stake to a Spanish brewery. Terrapin Brewing, in Athens, Georgia, however, is NOT majority-owned by SAB/Miller, as is sometimes claimed. The conglomerates' investment division does own a less-than 25% stake, but lies well within the 'craft' parameters.

Read the BA's report on the state of U.S. 'craft' beer in 2014: here. If the BA announces any significant modifications to its numbers and/or reveals more about its methodology, I'll update this post to reflect that.

Read the NBWA's report on the state of all of U.S. beer in 2014: here.